travel expenses when self employed

Everything You Need to Know About the Business Travel Tax Deduction

Justin is an IRS Enrolled Agent, allowing him to represent taxpayers before the IRS. He loves helping freelancers and small business owners save on taxes. He is also an attorney and works part-time with the Keeper Tax team.

You don’t have to fly first class and stay at a fancy hotel to claim travel expense tax deductions. Conferences, worksite visits, and even a change of scenery can (sometimes) qualify as business travel.

What counts as business travel?

The IRS does have a few simple guidelines for determining what counts as business travel. Your trip has to be:

Mostly business
An “ordinary and necessary” expense
Someplace far away from your “tax home”

What counts as "mostly business"?

The IRS will measure your time away in days. If you spend more days doing business activities than not, your trip is considered "mostly business". Your travel days are counted as work days.

Special rules for traveling abroad

If you are traveling abroad for business purposes, you trip counts as " entirely for business " as long as you spend less than 25% of your time on personal activities (like vacationing). Your travel days count as work days.

So say you you head off to Zurich for nine days. You've got a seven-day run of conference talks, client meetings, and the travel it takes to get you there. You then tack on two days skiing on the nearby slopes.

Good news: Your trip still counts as "entirely for business." That's because two out of nine days is less than 25%.

What is an “ordinary and necessary” expense?

“Ordinary and necessary” means that the trip:

Makes sense given your industry, and
Was taken for the purpose of carrying out business activities

If you have a choice between two conferences — one in your hometown, and one in London — the British one wouldn’t be an ordinary and necessary expense.

What is your tax home?

A taxpayer can deduct travel expenses anytime you are traveling away from home but depending on where you work the IRS definition of “home” can get complicated.

Your tax home is often — but not always — where you live with your family (what the IRS calls your "family home"). When it comes to defining it, there are two factors to consider:

What's your main place of business, and
How large is your tax home

What's your main place of business?

If your main place of business is somewhere other than your family home, your tax home will be the former — where you work, not where your family lives.

For example, say you:

Live with your family in Chicago, but
Work in Milwaukee during the week (where you stay in hotels and eat in restaurants)

Then your tax home is Milwaukee. That's your main place of business, even if you travel back to your family home every weekend.

How large is your tax home?

In most cases, your tax home is the entire city or general area where your main place of business is located.

The “entire city” is easy to define but “general area” gets a bit tricker. For example, if you live in a rural area, then your general area may span several counties during a regular work week.

Rules for business travel

Want to check if your trip is tax-deductible? Make sure it follows these rules set by the IRS.

1. Your trip should take you away from your home base

A good rule of thumb is 100 miles. That’s about a two hour drive, or any kind of plane ride. To be able to claim all the possible travel deductions, your trip should require you to sleep somewhere that isn’t your home.

2. You should be working regular hours

In general, that means eight hours a day of work-related activity.

It’s fine to take personal time in the evenings, and you can still take weekends off. But you can’t take a half-hour call from Disneyland and call it a business trip.

Here's an example. Let’s say you’re a real estate agent living in Chicago. You travel to an industry conference in Las Vegas. You go to the conference during the day, go out in the evenings, and then stay the weekend. That’s a business trip!

3. The trip should last less than a year

Once you’ve been somewhere for over a year, you’re essentially living there. However, traveling for six months at a time is fine!

For example, say you’re a freelancer on Upwork, living in Seattle. You go down to stay with your sister in San Diego for the winter to expand your client network, and you work regular hours while you’re there. That counts as business travel.

What about digital nomads?

With the rise of remote-first workplaces, many freelancers choose to take their work with them as they travel the globe. There are a couple of requirements these expats have to meet if they want to write off travel costs.

Requirement #1: A tax home

Digital nomads have to be able to claim a particular foreign city as a tax home if they want to write off any travel expenses. You don't have to be there all the time — but it should be your professional home base when you're abroad.

For example, say you've rent a room or a studio apartment in Prague for the year. You regularly call clients and finish projects from there. You still travel a lot, for both work and play. But Prague is your tax home, so you can write off travel expenses.

Requirement #2: Some work-related reason for traveling

As long as you've got a tax home and some work-related reason for traveling, these excursion count as business trips. Plausible reasons include meeting with local clients, or attending a local conference and then extending your stay.

However, if you’re a freelance software developer working from Thailand because you like the weather, that unfortunately doesn't count as business travel.

The travel expenses you can write off

As a rule of thumb, all travel-related expenses on a business trip are tax-deductible. You can also claim meals while traveling, but be careful with entertainment expenses (like going out for drinks!).

Here are some common travel-related write-offs you can take.

🛫 All transportation

Any transportation costs are a travel tax deduction. This includes traveling by airplane, train, bus, or car. Baggage fees are deductible, and so are Uber rides to and from the airport.

Just remember: if a client is comping your airfare, or if you booked your ticket with frequent flier miles, then it isn't deductible since your cost was $0.

If you rent a car to go on a business trip, that rental is tax-deductible. If you drive your own vehicle, you can either take actual costs or use the standard mileage deduction. There's more info on that in our guide to deducting car expenses .

Hotels, motels, Airbnb stays, sublets on Craigslist, even reimbursing a friend for crashing on their couch: all of these are tax-deductible lodging expenses.

🥡 Meals while traveling

If your trip has you staying overnight — or even crashing somewhere for a few hours before you can head back — you can write off food expenses. Grabbing a burger alone or a coffee at your airport terminal counts! Even groceries and takeout are tax-deductible.

One important thing to keep in mind: You can usually deduct 50% of your meal costs. For 2021 and 2022, meals you get at restaurants are 100% tax-deductible. Go to the grocery store, though, and you’re limited to the usual 50%.

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🌐 Wi-Fi and communications

Wi-Fi — on a plane or at your hotel — is completely deductible when you’re traveling for work. This also goes for other communication expenses, like hotspots and international calls.

If you need to ship things as part of your trip — think conference booth materials or extra clothes — those expenses are also tax-deductible.

👔 Dry cleaning

Need to look your best on the trip? You can write off related expenses, like laundry charges.

{write_off_block}

Travel expenses you can't deduct

Some travel costs may seem like no-brainers, but they're not actually tax-deductible. Here are a couple of common ones to watch our for.

The cost of bringing your child or spouse

If you bring your child or spouse on a business trip, your travel expense deductions get a little trickier. In general, the cost of bring other people on a business trip is considered personal expense — which means it's not deductible.

You can only deduct travel expenses if your child or spouse:

Is an employee,
Has a bona fide business purpose for traveling with you, and
Would otherwise be allowed to deduct the travel expense on their own

Some hotel bill charges

Staying in a hotel may be required for travel purposes. That's why the room charge and taxes are deductible.

Some additional charges, though, won't qualify. Here are some examples of fees that aren't tax-deductible:

Gym or fitness center fees
Movie rental fees
Game rental fees

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Where to claim travel expenses when filing your taxes

If you are self-employed, you will claim all your income tax deduction on the Schedule C. This is part of the Form 1040 that self-employed people complete ever year.

What happens if your business deductions are disallowed?

If the IRS challenges your business deduction and they are disallowed, there are potential penalties. This can happen if:

The deduction was not legitimate and shouldn't have been claimed in the first place, or
The deduction was legitimate, but you don't have the documentation to support it

When does the penalty come into play?

The 20% penalty is not automatic. It only applies if it allowed you to pay substantially less taxes than you normally would. In most cases, the IRS considers “substantially less” to mean you paid at least 10% less.

In practice, you would only reach this 10% threshold if the IRS disqualified a significant number of your travel deductions.

How much is the penalty?

The penalty is normally 20% of the difference between what you should have paid and what you actually paid. You also have to make up the original difference.

In total, this means you will be paying 120% of your original tax obligation: your original obligation, plus 20% penalty.

Justin W. Jones, EA, JD

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Tax Deductions for Business Travelers

When you are self-employed, you generally can deduct the ordinary and necessary expenses of traveling away from home for business from your income. But before you start listing travel deductions, make sure you understand what the Internal Revenue Service (IRS) means by "home," "business," and "ordinary and necessary expenses."

Ordinary vs. necessary expenses

Business home, not home sweet home, transportation expenses on a business trip are deductible, fees for getting around are deductible, lodging, meals and tips are deductible.

Key Takeaways

Typically, you can deduct travel expenses if they are ordinary (common and accepted in your industry) and necessary (helpful and appropriate for your business).
You can deduct business travel expenses when you are away from both your home and the location of your main place of business (tax home).
Deductible expenses include transportation, baggage fees, car rentals, taxis and shuttles, lodging, tips, and fees.
You can also deduct 50% of either the actual cost of meals or the standard meal allowance, which is based on the federal meals and incidental expense per diem rate.

The IRS defines expense ordinary and necessary expenses this way:

An expense is ordinary if it is common and accepted in your industry
An expense is necessary if it is helpful and appropriate for your business

You can claim business travel expenses when you're away from home but "home" doesn't always mean where your family lives. You also have a tax home—the city where your main place of business is located—which may not be the same as the location of your family home.

For example, if you live in Petaluma, California but your permanent work location is in San Jose where you stay in hotels and eat out during the work week, you typically can't deduct your expenses in San Jose or your transportation home on weekends.

In this situation San Jose is your tax home , so no deductions are permitted for ordinary and necessary expenses there.
Your trips to your home in Petaluma are not mandated by business.

Go by plane, train or bus—the actual cost of the ticket to ride is deductible, as well as any baggage fees. If you have to pay top dollar for a last-minute flight, the high-priced ticket is a business expense, but if you use frequent-flyer miles for a free ticket, the deduction is zero.

If you decide to rent a car to go on a business trip, the car rental is deductible. If you drive your own vehicle, you can usually take actual costs or the IRS standard mileage rate. For 2023 the rate is 65.5 cents per mile. You also can add tolls and parking costs onto your deduction. This amount increases to 67 cents per mile for 2024.

TurboTax Tip: Even if you use the federal meals and incidental expense per diem rates to calculate your deductions, be sure to keep receipts from all your meals and incidental expenses.

Fares for taxis or shuttles can be deducted as business travel expenses. For example, you can deduct the fare or other costs to go to:

Airport or train station
Hotel from the airport or train station
Between your hotel and the work location
Between clients in the area

If you rent a car when you arrive at your destination, the expense is deductible as long as the car is used exclusively for business. If you use it both for business and personal purposes, you can only deduct the portion of the rental used for business.

The IRS allows business travelers to deduct business-related meals and hotel costs, as long as they are reasonable considering the circumstances—not lavish or extravagant.

You would have to eat if you were home, so this might explain why the IRS limits meal deductions to 50% of either the:

Actual cost of the meal
Standard meal allowance

This allowance is based on the federal meals and incidental expense per diem rate that depends on where and when you travel.

Generally, you can deduct 50% of the cost of meals. Alternatively, if you do not incur any meal expenses nor claim the standard meal allowance, you can deduct the amount of $5 per day for incidental expenses. You can also deduct incidental expenses, such as:

Fees and tips given to hotel staff
Fees for porters and baggage carriers

But don't forget to keep track of the actual costs.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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Determining Tax Deductions for Travel Expenses + List of Deductions

Published August 15, 2023

Published Aug 15, 2023

WRITTEN BY: Tim Yoder, Ph.D., CPA

This article is part of a larger series on Accounting Software .

1. Determine Your Trip Meets the Requirements of a Business Trip
2. Check the List of Business Expenses That Qualify for Deductions
3. (For Those Mixing Business & Personal Travel): Allocate Expenses

Bottom Line

The IRS considers deductible travel expenses to be any ordinary and necessary expenses you incur while traveling away from home on business. To get tax deductions for travel expenses, the trip must have a business purpose and be temporary (less than one year) and you must be away from your tax home for a length of time that exceeds your usual work day or be away overnight to get sleep to fulfill the demands of your job while away.

Key Takeaways

A qualifying business trip must take you away from home overnight long enough to require rest.
Most expenses incurred during a qualifying business trip are deductible, including meals on days off.
Partnerships, limited liability companies (LLCs), and corporations can directly pay or reimburse employees for business travel expenses and deduct them from their business returns.
Self-employed business owners will deduct their travel expenses on Schedule C, while farmers will use Schedule F.
Purely personal expenses on business trips, such as sightseeing, are nondeductible.

Step 1: Determine Your Trip Meets the Requirements of a Business Trip

A business trip for tax purposes is one that meets the following criteria:

There must be a business purposes for the travel
You are required to be away from your tax home
The trip lasts overnight or a period long enough to require rest
The trip is temporary

Business Purpose

Your trip must be an ordinary and necessary part of conducting your business for your expenses to be deductible. Below are some reasons you may decide to travel for business:

Meeting with clients or customers: If you travel overnight to meet with clients or customers for business purposes, such as negotiating contracts, discussing projects, or providing consultations.
Attending business conferences or seminars: If you travel to attend conferences, seminars, or trade shows that are relevant to your business activities, including acquiring new industry knowledge or networking with other professionals.
Training or professional developmen t : If you travel to attend training programs, workshops, or courses directly related to your business or profession.
Conducting in-person meetings or negotiations: If you need to travel to have face-to-face meetings or negotiations with business partners, suppliers, or other stakeholders.

Your tax home is not your residence but rather your principal place of business activity including the entire city or general location of your business. So, your business trip cannot be in the general vicinity of your principal place of business for you to be away from home.

Amount of time you spend at each location
Degree of business activity in each area
Relative significance of the financial return from each area
No regular place of business: If, by the nature of the work, there is no regular or principal place of business, then your tax home will be the place where you regularly live and where you travel to different job sites to perform your service.

For example, a self-employed repair person may not have a regular place of business because they spend each workday at a different customer’s location.

Overnight Stay

Overnight stays for travel purposes do not specifically mean staying from evening to the next morning. Instead, overnight means that the trip is longer than a typical day’s work and long enough for you to require rest. Resting in your car is generally not enough, but if you have to get a hotel room, then the trip will qualify as overnight regardless of when you sleep.

Transportation vs travel expenses: Local transportation at your tax home can be deductible without an overnight stay—if there is a business reason for the transportation, such as driving from your office to visit a client. On a tangent, when you travel overnight, your transportation is deductible, and so are things like lodging, meals, and incidental expenses.

Temporary Travel

For purposes of business travel, a temporary stay is one that is expected to last for less than one year. Open-ended trips are not temporary.

However, say you initially anticipate that your trip will last less than one year, but it later becomes apparent that it will last more than one year. The trip is a deductible business trip up until the point in time it becomes apparent it will last more than one year.

The IRS will also consider a series of assignments to the same location, all for short periods, that together cover a long period to be an indefinite assignment. Any expenses you incur from this type of trip will not be deductible.

Step 2: Check the List of Business Expenses That Qualify for Deductions

Your travel expenses must be business-related—unless an exception applies—to qualify for a deduction. However, if you incur expenses that are purely for personal pleasure, they are nondeductible.

Here is a list of business travel expenses that can be deducted.

Round-trip Transportation To-and-From the Destination

Transportation for a round trip to and from your temporary work location is deductible—and it could be anything that gets you to the location, including via your personal car. If you use your personal car, your costs are calculated using either the actual expenses or the standard mileage rate .

In addition, you can deduct additional round trips to return to home when you are not working.

However, the deduction for the additional round trips is limited to the cost you would have incurred if you stayed at the temporary location. Those costs could include meals and lodging.

The business purpose of the meals is your business trip and are thus deductible—even if you eat alone.
Meals on days off qualify.
Travel to and from meals is deductible—even on your days off.
The meals do not have to have a specific business purpose, such as meeting with a client.
For longer trips, lodging can include monthly rentals.
If you return home on your days off but keep the lodging at your travel location, then the lodging is still deductible if it is ordinary and necessary. For instance, the monthly rent of an apartment at your travel location would be deductible even if you return home on the weekends.

Transportation at the Destination

Once you arrive at your destination, you may need additional transportation to get around town—and these costs are deductible. The only exception would be if you travel to the destination for a purely personal reason like sightseeing on your day off.

Incidentals

Incidental expenses are minor expenditures associated with business travel. You can deduct the actual cost of any one of the following expenses:

Shipping of baggage and sample or display material between your regular and temporary work locations
Business seminar and registration fees
Dry cleaning and laundry
Business calls include business communications by fax machine and other communication devices
Tips you pay for services related to any of these expenses
Parking, tolls, and fees
Any other similar ordinary and necessary expenses related to your business travel

Step 3 (For Those Mixing Business & Personal Travel): Allocate Expenses

When trips are both business and personal, the allocation of expenses varies based on the primary purpose of the trip. Determining the primary purpose of your journey requires you to evaluate the time spent on business vs personal activities.

Primarily Business Domestic Trips

If your trip is primarily for business purposes, then the round-trip transportation is 100% deductible and does not need to be allocated to the personal portion of your trip. However, all other expenses, like lodging and meals, must be allocated to personal expenses for days where there was no business reason for staying.

For example, if your seminar ends on Friday and you stay until Sunday, then the lodging and meals for Saturday and Sunday are nondeductible.

Primarily Personal Domestic Trips

If the primary purpose of your trip is personal, then none of the round-trip expenses are deductible. However, you can deduct the business portion of meals, lodging, and local transportation that was incurred for a business purpose.

Let’s say you stay a couple of days after your family vacation to meet with a client. The lodging and meals for those extra days are deductible.

Business Foreign Trips

The allocation of travel expenses on foreign trips is slightly different from the rules above. Round-trip transportation for foreign trips must be allocated to business and personal based on the number of business vs personal days on the trip. This is different from the “all or nothing” rule for the cost of domestic round-trip travel.

If your spouse joins you on a business trip, you usually cannot deduct any of their expenses. However, if your spouse’s trip satisfies a business purpose, then expenses must be otherwise deductible by the spouse.

Generally, for the travel costs of a spouse, dependent, or any other person to be tax-deductible, they must work for the business or be a co-owner.

Frequently Asked Questions (FAQs)

Are travel expenses tax deductible for business.

Yes, roundtrip travel is 100% tax deductible as long as the primary purpose of the trip is business. Once at your destination, expenses must be allocated between business and personal. However, all meals are deductible as long as the reason for your continued stay is business.

Can I deduct travel expenses for my employees?

Yes, you can generally deduct travel expenses for your employees as long as the expenses are ordinary and necessary, directly related to your business, and properly substantiated.

Is there a limit to the amount of travel expenses I can deduct?

Yes, there are some such as business travel on a cruise ship, where the expense is limited to $2,000 per year. Also, your expenses are limited to the non-lavish or extravagant cost of the trip, so you may want to be careful before booking a 5-star hotel.

Travel expenses are ordinary and necessary expenses you incur while you are temporarily away from home, so these expenses cannot be lavish in nature. To determine if a travel expense is deductible, it must be directly related to your trade or business.

When it comes to travel expenses, having well-organized records makes it much simpler to complete your tax return. Keep track of any records that may be used to substantiate a deduction, such as receipts, canceled checks, and other documentation.

About the Author

Find Timothy On LinkedIn

Tim Yoder, Ph.D., CPA

Tim worked as a tax professional for BKD, LLP before returning to school and receiving his Ph.D. from Penn State. He then taught tax and accounting to undergraduate and graduate students as an assistant professor at both the University of Nebraska-Omaha and Mississippi State University. Tim is a Certified QuickBooks ProAdvisor as well as a CPA with 28 years of experience. He spent two years as the accountant at a commercial roofing company utilizing QuickBooks Desktop to compile financials, job cost, and run payroll. Tim has spent the past 4 years writing and reviewing content for Fit Small Business on accounting software, taxation, and bookkeeping.

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Building Your Business
Business Taxes

7 Rules You Should Know About Deducting Business Travel Expenses

What Is Your "Tax Home"?

Charges on Your Hotel Bill

The 50% rule for meals, the cost of bringing a spouse, friend or employee.

Using Per Diems To Calculate Employee Travel Costs

Combined Business/Personal Trips

International business travel.

The Cost of a Cruise (Within Limits)

Frequently Asked Questions (FAQs)

Helde Benser / Getty Images

The IRS has a specific definition for business travel when it comes to determining whether these expenses are tax deductible. The agency says business travel is travel that takes you away from your tax home and is "substantially longer than an ordinary day's work." It requires that you sleep or rest while you're away from home, and that you do so. The travel must be "temporary." This means it can't last a year or more.

Key Takeaways

You can deduct expenses that take you away from your tax home for a period of time that would require you to spend the night.
Your tax home is the city or area where your regular place of business is located.
You’re limited to 50% of the cost of your meals.
Your trip must be entirely business-related for costs to be deductible, but special rules apply if you travel outside the U.S.

What Is Your "Tax Home"?

Your tax home is a concept set by the IRS to help determine whether a trip is tax deductible. It's defined by the IRS as the entire city or general area where your regular place of business is located. It's not necessarily the area where you live.

Your tax home can be used to determine whether your business travel expenses are deductible after you've determined where it's located. You can probably count your expenses during travel as business deductions if you have to leave your tax home overnight or if you otherwise need time to rest and sleep while you're away.

Check with a tax professional to make sure you're accurately identifying the location of your tax home.

Charges for your room and associated tax are deductible, as are laundry expenses and charges for phone calls or for use of a fax machine. Tips are deductible as well. But additional personal charges, such as gym fees or fees for movies or games aren't deductible.

You can deduct the cost of meals while you're traveling, but entertainment expenses are no longer deductible and you can't deduct "lavish or extravagant" meals.

Meal costs are deductible at 50%. The 50% limit also applies to taxes and tips. You can use either your actual costs or a standard meal allowance to take a meal cost deduction, as long as it doesn't exceed the 50% limit.

The cost of bringing a spouse, child, or anyone else along on a business trip is considered a personal expense and isn't deductible. But you may be able to deduct travel expenses for the individual if:

The person is an employee
They have a bona fide business purpose for traveling with you
They would otherwise be allowed to deduct travel expenses

You may be able to deduct the cost of a companion's travel if you can prove that the other person is employed by the business and is performing substantial business-related tasks while on the trip. This may include taking minutes at meetings or meeting with business clients.

Using Per Diems To Calculate Employee Travel Costs

The term "per diem" means "per day." Per diems are amounts that are considered reasonable for daily meals and miscellaneous expenses while traveling.

Per diem rates are set for U.S. and overseas travel, and the rates differ depending on the area. They're higher in larger U.S. cities than for sections of the country outside larger metropolitan areas. Companies can set their own per diem rates, but most businesses use the rates set by the U.S. government.

Per diem reimbursements aren't taxable unless they're greater than the maximum rate set by the General Service Administration. The excess is taxable to the employee.

If you don't spend all your time on business activities during an international trip, you can only deduct the business portion of getting to and from the destination. You must allocate costs between business and personal activities.

Your trip must be entirely business-related for you to take deductions for travel costs if you remain in the U.S., but some "incidental" personal time is okay. It would be incidental to the main purpose of your trip if you travel to Dallas for business and you spend an evening with family in the area while you're there.

But attempting to turn a personal trip into a business trip won't work unless the trip is substantially for business purposes. The IRS indicates that “the scheduling of incidental business activities during a trip, such as viewing videotapes or attending lectures dealing with general subjects, will not change what is really a vacation into a business trip."

The rules are different if part or all of your trip takes you outside the U.S. Your international travel may be considered business-related if you were outside the U.S. for more than a week and less than 25% of the time was spent on personal activities.

You can deduct the costs of your entire trip if it takes you outside the U.S. and you spend the entire time on business activities, but you must have "substantial control" over the itinerary. An employee traveling with you wouldn't have control over the trip, but you would as the business owner would.

The trip may be considered entirely for business if you spend less than 25% of the time on personal activities if your trip takes you outside the U.S. for more than a week.

You can only deduct the business portion of getting to and from the destination if you don't spend all your time on business activities during an international trip. You must allocate costs between your business and personal activities.

The Cost of a Cruise (Within Limits)

The cost of a cruise may be deductible up to the specified limit determined by the IRS, which is $2,000 per year as of 2022. You must be able to show that the cruise was directly related to a business event, such as a business meeting or board of directors meeting.

The IRS imposes specific additional strict requirements for deducting cruise travel as a business expense.

How do you write off business travel expenses?

Business travel expenses are entered on Schedule C if you're self-employed . The schedule is filed along with your Form 1040 tax return. It lists all your business income, then you can subtract the cost of your business travel and other business deductions you qualify for to arrive at your taxable income.

What are standard business travel expenses?

Standard business travel expenses include lodging, food, transportation costs , shipping of baggage and/or work items, laundry and dry cleaning, communication costs, and tips. But numerous rules apply so check with a tax professional before you claim them.

The Bottom Line

These tax deduction regulations are complicated, and there are many qualifications and exceptions. Consult with your tax and legal professionals before taking actions that could affect your business.

IRS. " Topic No. 511: Business Travel Expenses ."

IRS. " Publication 463 (2021), Travel, Gift, and Car Expenses ."

IRS. " Here’s What Taxpayers Need To Know About Business-Related Travel Deductions ."

How to Deduct Travel Expenses (with Examples)

Reviewed by

November 3, 2022

This article is Tax Professional approved

Good news: most of the regular costs of business travel are tax deductible.

Even better news: as long as the trip is primarily for business, you can tack on a few vacation days and still deduct the trip from your taxes (in good conscience).

I am the text that will be copied.

Even though we advise against exploiting this deduction, we do want you to understand how to leverage the process to save on your taxes, and get some R&R while you’re at it.

Follow the steps in this guide to exactly what qualifies as a travel expense, and how to not cross the line.

The travel needs to qualify as a “business trip”

Unfortunately, you can’t just jump on the next plane to the Bahamas and write the trip off as one giant business expense. To write off travel expenses, the IRS requires that the primary purpose of the trip needs to be for business purposes.

Here’s how to make sure your travel qualifies as a business trip.

1. You need to leave your tax home

Your tax home is the locale where your business is based. Traveling for work isn’t technically a “business trip” until you leave your tax home for longer than a normal work day, with the intention of doing business in another location.

2. Your trip must consist “mostly” of business

The IRS measures your time away in days. For a getaway to qualify as a business trip, you need to spend the majority of your trip doing business.

For example, say you go away for a week (seven days). You spend five days meeting with clients, and a couple of days lounging on the beach. That qualifies as business trip.

But if you spend three days meeting with clients, and four days on the beach? That’s a vacation. Luckily, the days that you travel to and from your location are counted as work days.

3. The trip needs to be an “ordinary and necessary” expense

“Ordinary and necessary ” is a term used by the IRS to designate expenses that are “ordinary” for a business, given the industry it’s in, and “necessary” for the sake of carrying out business activities.

If there are two virtually identical conferences taking place—one in Honolulu, the other in your hometown—you can’t write off an all-expense-paid trip to Hawaii.

Likewise, if you need to rent a car to get around, you’ll have trouble writing off the cost of a Range Rover if a Toyota Camry will get you there just as fast.

What qualifies as “ordinary and necessary” can seem like a gray area at times, and you may be tempted to fudge it. Our advice: err on the side of caution. if the IRS chooses to investigate and discovers you’ve claimed an expense that wasn’t necessary for conducting business, you could face serious penalties .

4. You need to plan the trip in advance

You can’t show up at Universal Studios , hand out business cards to everyone you meet in line for the roller coaster, call it “networking,” and deduct the cost of the trip from your taxes. A business trip needs to be planned in advance.

Before your trip, plan where you’ll be each day, when, and outline who you’ll spend it with. Document your plans in writing before you leave. If possible, email a copy to someone so it gets a timestamp. This helps prove that there was professional intent behind your trip.

The rules are different when you travel outside the United States

Business travel rules are slightly relaxed when you travel abroad.

If you travel outside the USA for more than a week (seven consecutive days, not counting the day you depart the United States):

You must spend at least 75% of your time outside of the country conducting business for the entire getaway to qualify as a business trip.

If you travel outside the USA for more than a week, but spend less than 75% of your time doing business, you can still deduct travel costs proportional to how much time you do spend working during the trip.

For example, say you go on an eight-day international trip. If you spend at least six days conducting business, you can deduct the entire cost of the trip as a business expense—because 6 is equivalent to 75% of your time away, which, remember, is the minimum you must spend on business in order for the entire trip to qualify as a deductible business expense.

But if you only spend four days out of the eight-day trip conducting business—or just 50% of your time away—you would only be able to deduct 50% of the cost of your travel expenses, because the trip no longer qualifies as entirely for business.

List of travel expenses

Here are some examples of business travel deductions you can claim:

Plane, train, and bus tickets between your home and your business destination
Baggage fees
Laundry and dry cleaning during your trip
Rental car costs
Hotel and Airbnb costs
50% of eligible business meals
50% of meals while traveling to and from your destination

On a business trip, you can deduct 100% of the cost of travel to your destination, whether that’s a plane, train, or bus ticket. If you rent a car to get there, and to get around, that cost is deductible, too.

The cost of your lodging is tax deductible. You can also potentially deduct the cost of lodging on the days when you’re not conducting business, but it depends on how you schedule your trip. The trick is to wedge “vacation days” in between work days.

Here’s a sample itinerary to explain how this works:

Thursday: Fly to Durham, NC. Friday: Meet with clients. Saturday: Intermediate line dancing lessons. Sunday: Advanced line dancing lessons. Monday: Meet with clients. Tuesday: Fly home.

Thursday and Tuesday are travel days (remember: travel days on business trips count as work days). And Friday and Monday, you’ll be conducting business.

It wouldn’t make sense to fly home for the weekend (your non-work days), only to fly back into Durham for your business meetings on Monday morning.

So, since you’re technically staying in Durham on Saturday and Sunday, between the days when you’ll be conducting business, the total cost of your lodging on the trip is tax deductible, even if you aren’t actually doing any work on the weekend.

It’s not your fault that your client meetings are happening in Durham—the unofficial line dancing capital of America .

Meals and entertainment during your stay

Even on a business trip, you can only deduct a portion of the meal and entertainment expenses that specifically facilitate business. So, if you’re in Louisiana closing a deal over some alligator nuggets, you can write off 50% of the bill.

Just make sure you make a note on the receipt, or in your expense-tracking app , about the nature of the meeting you conducted—who you met with, when, and what you discussed.

On the other hand, if you’re sampling the local cuisine and there’s no clear business justification for doing so, you’ll have to pay for the meal out of your own pocket.

Meals and entertainment while you travel

While you are traveling to the destination where you’re doing business, the meals you eat along the way can be deducted by 50% as business expenses.

This could be your chance to sample local delicacies and write them off on your tax return. Just make sure your tastes aren’t too extravagant. Just like any deductible business expense, the meals must remain “ordinary and necessary” for conducting business.

How Bench can help

Surprised at the kinds of expenses that are tax-deductible? Travel expenses are just one of many unexpected deductible costs that can reduce your tax bill. But with messy or incomplete financials, you can miss these tax saving expenses and end up with a bigger bill than necessary.

Enter Bench, America’s largest bookkeeping service. With a Bench subscription, your team of bookkeepers imports every transaction from your bank, credit cards, and merchant processors, accurately categorizing each and reviewing for hidden tax deductions. We provide you with complete and up-to-date bookkeeping, guaranteeing that you won’t miss a single opportunity to save.

Want to talk taxes with a professional? With a premium subscription, you get access to unlimited, on-demand consultations with our tax professionals. They can help you identify deductions, find unexpected opportunities for savings, and ensure you’re paying the smallest possible tax bill. Learn more .

Bringing friends & family on a business trip

Don’t feel like spending the vacation portion of your business trip all alone? While you can’t directly deduct the expense of bringing friends and family on business trips, some costs can be offset indirectly.

Driving to your destination

Have three or four empty seats in your car? Feel free to fill them. As long as you’re traveling for business, and renting a vehicle is a “necessary and ordinary” expense, you can still deduct your business mileage or car rental costs even when others join you for the ride.

One exception: If you incur extra mileage or “unnecessary” rental costs because you bring your family along for the ride, the expense is no longer deductible because it isn’t “necessary or ordinary.”

For example, let’s say you had to rent an extra large van to bring your children on a business trip. If you wouldn’t have needed to rent the same vehicle to travel alone, the expense of the extra large van no longer qualifies as a business deduction.

Renting a place to stay

Similar to the driving expense, you can only deduct lodging equivalent to what you would use if you were travelling alone.

However, there is some flexibility. If you pay for lodging to accommodate you and your family, you can deduct the portion of lodging costs that is equivalent to what you would pay only for yourself .

For example, let’s say a hotel room for one person costs $100, but a hotel room that can accommodate your family costs $150. You can rent the $150 option and deduct $100 of the cost as a business expense—because $100 is how much you’d be paying if you were staying there alone.

This deduction has the potential to save you a lot of money on accommodation for your family. Just make sure you hold on to receipts and records that state the prices of different rooms, in case you need to justify the expense to the IRS

Heads up. When it comes to AirBnB, the lines get blurry. It’s easy to compare the cost of a hotel room with one bed to a hotel room with two beds. But when you’re comparing significantly different lodgings, with different owners—a pool house versus a condo, for example—it becomes hard to justify deductions. Sticking to “traditional” lodging like hotels and motels may help you avoid scrutiny during an audit. And when in doubt: ask your tax advisor.

So your trip is technically a vacation? You can still claim any business-related expenses

The moment your getaway crosses the line from “business trip” to “vacation” (e.g. you spend more days toasting your buns than closing deals) you can no longer deduct business travel expenses.

Generally, a “vacation” is:

A trip where you don’t spend the majority of your days doing business
A business trip you can’t back up with correct documentation

However, you can still deduct regular business-related expenses if you happen to conduct business while you’re on vacay.

For example, say you visit Portland for fun, and one of your clients also lives in that city. You have a lunch meeting with your client while you’re in town. Because the lunch is business related, you can write off 50% of the cost of the meal, the same way you would any other business meal and entertainment expense . Just make sure you keep the receipt.

Meanwhile, the other “vacation” related expenses that made it possible to meet with this client in person—plane tickets to Portland, vehicle rental so you could drive around the city—cannot be deducted; the trip is still a vacation.

If your business travel is with your own vehicle

There are two ways to deduct business travel expenses when you’re using your own vehicle.

Actual expenses method
Standard mileage rate method

Actual expenses is where you total up the actual cost associated with using your vehicle (gas, insurance, new tires, parking fees, parking tickets while visiting a client etc.) and multiply it by the percentage of time you used it for business. If it was 50% for business during the tax year, you’d multiply your total car costs by 50%, and that’d be the amount you deduct.

Standard mileage is where you keep track of the business miles you drove during the tax year, and then you claim the standard mileage rate .

The cost of breaking the rules

Don’t bother trying to claim a business trip unless you have the paperwork to back it up. Use an app like Expensify to track business expenditure (especially when you travel for work) and master the art of small business recordkeeping .

If you claim eligible write offs and maintain proper documentation, you should have all of the records you need to justify your deductions during a tax audit.

Speaking of which, if your business is flagged to be audited, the IRS will make it a goal to notify you by mail as soon as possible after your filing. Usually, this is within two years of the date for which you’ve filed. However, the IRS reserves the right to go as far back as six years.

Tax penalties for disallowed business expense deductions

If you’re caught claiming a deduction you don’t qualify for, which helped you pay substantially less income tax than you should have, you’ll be penalized. In this case, “substantially less” means the equivalent of a difference of 10% of what you should have paid, or $5,000—whichever amount is higher.

The penalty is typically 20% of the difference between what you should have paid and what you actually paid in income tax. This is on top of making up the difference.

Ultimately, you’re paying back 120% of what you cheated off the IRS.

If you’re slightly confused at this point, don’t stress. Here’s an example to show you how this works:

Suppose you would normally pay $30,000 income tax. But because of a deduction you claimed, you only pay $29,000 income tax.

If the IRS determines that the deduction you claimed is illegitimate, you’ll have to pay the IRS $1200. That’s $1000 to make up the difference, and $200 for the penalty.

Form 8275 can help you avoid tax penalties

If you think a tax deduction may be challenged by the IRS, there’s a way you can file it while avoiding any chance of being penalized.

File Form 8275 along with your tax return. This form gives you the chance to highlight and explain the deduction in detail.

In the event you’re audited and the deduction you’ve listed on Form 8275 turns out to be illegitimate, you’ll still have to pay the difference to make up for what you should have paid in income tax—but you’ll be saved the 20% penalty.

Unfortunately, filing Form 8275 doesn’t reduce your chances of being audited.

Where to claim travel expenses

If you’re self-employed, you’ll claim travel expenses on Schedule C , which is part of Form 1040.

When it comes to taking advantage of the tax write-offs we’ve discussed in this article—or any tax write-offs, for that matter—the support of a professional bookkeeping team and a trusted CPA is essential.

Accurate financial statements will help you understand cash flow and track deductible expenses. And beyond filing your taxes, a CPA can spot deductions you may have overlooked, and represent you during a tax audit.

Learn more about how to find, hire, and work with an accountant . And when you’re ready to outsource your bookkeeping, try Bench .

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What Travel Expenses Are Deductible for the Self-Employed?

As you grow your business, you'll often have to travel out of town for work purposes. But, we frequently get asked, "What travel expenses are deductible?" The IRS has some strict rules about this so let's go over what you can and can't write off at tax time.

Deductions when you travel out of town for business

If your trip is for business, almost are of your business travel expenses are deductible. Let's separate these into two broad categories: Business expenses at your destination and transportation costs.

Business travel expenses

There are a variety of expenses you incur when you travel for business. These are all deductible. The list below includes the following but isn't limited to:

Hotels or lodging
Transportation at destination (taxi, Uber, public transportation)
Computer rental fees
Tips you pay on any of the other costs

You're human, so you have to eat and drink. The IRS recognizes this but has also seen people try to abuse the meal deduction in the past. Also, your meals at home aren't deductible. Because of that, you can deduct 50 percent of your meals and beverages on business trips . Often, your meals during business trips can be with other people. It's common to lay the groundwork for a deal or to get a deal over the line while out eating. These food costs can also be deducted at 50 percent. Remember, you must discuss business with one or more business associates either before, during or after this entertainment expense. The days of the three-martini "business" lunch are over. These entertainment expenses must include actual business discussions. These don't have to lead to direct deals, though. It's not just for clients or potential clients, too. You can deduct half the costs of a business meal with suppliers, employees, agents, partners or anyone you're likely to meet for business reasons.

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Business travel and transportation expenses

If you spend more than half your time on business activities while on a trip, you can deduct 100 percent of your transportation costs. That could be the cost of flights or train tickets. Like with other business expenses , you can only deduct travel expenses that are "ordinary and necessary business-related expenses." It also says that extravagant expenses aren't allowed to be deducted. There's a bit of subjectivity in those words. You can deduct the costs of first-class tickets but know this will likely raise red flags with the IRS. Be prepared to justify the business reasons for this type of airfare. One justification could be that this was the only flight you could get to a particular location by a specific time. Of course, don't forget about deducting your mileage when you're out of town for business .

Mixing business with pleasure

If you plan it properly, you may be able to combine some personal fun with your business trip and still receive some tax relief. The key is that business-related actions consume more than half of your time. Example : Jill, a consultant from Phoenix, travels to Chicago for five days to work with a new client. She decides to take the weekend to go sightseeing. She takes in a Cubs game, goes on an architecture tour and catches up with some old friends at Restaurant Row. Because more than half her time is spent on work, she can write off the cost of her flights. She can also deduct the portion of lodging related to work and 50 percent of the costs of the meals related to her consulting job. She cannot deduct the costs of accommodation for the weekend or her personal entertainment.

Business trips out of the country

The above rules apply if you travel within the United State, but there are some slightly different rules for foreign trips. If you travel outside the United States for no more than seven consecutive days, you can deduct 100 percent of your transportation expenses if you spend part of the time on business. It doesn't have to be a majority of the time, just some of your time. You can also deduct the business expenses on those days you do work. The IRS isn‚Äôt trying to subsidize your vacation to the Amalfi Coast, though. Once you hit that week threshold, the requirements for work go up. If you spend more than 75 percent of your time on business at the foreign destination, you can deduct your airfare (or other transportation) and other business-related expenses including lodging. If you spend more than half your time but less than 75 percent of your time on work, you can only deduct the business percentage of your costs. This includes transportation, lodging and others costs you incur. If you spend less than 51 percent of your time on work while on a foreign trip that lasts for more than seven consecutive days, you cannot deduct any of your costs.

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Eliminated or Changed Deductions

1. self-employment tax deduction, 2. home office deduction.

3. Internet/Phone Bills Deduction
4. Health Insurance Deduction

5. Meals Deduction

6. travel deduction, 7. vehicle use deduction, 8. interest deduction, 9. dues and publications deduction, 10. education deduction, 11. business insurance deduction, 12. rent deduction, 13. startup costs deduction, 14. advertising deduction.

15. Retirement Plan Deduction

16. Office Supplies Deduction

The bottom line.

Deductions & Credits
Tax Deductions

16 Tax Deductions and Benefits for the Self-Employed

Know where you can save money and grow your profits

Amy Fontinelle has more than 15 years of experience covering personal finance, corporate finance and investing.

Lea Uradu, J.D. is a Maryland State Registered Tax Preparer, State Certified Notary Public, Certified VITA Tax Preparer, IRS Annual Filing Season Program Participant, and Tax Writer.

Legislators have written numerous lines into the tax code over the years to soften the blow of the extra costs that self-employed taxpayers must shoulder as they do business. The Tax Cuts and Jobs Act (TCJA) , passed during the Trump administration, is one of the U. S. Congress’s most significant tax overhauls. The TCJA became effective with the 2018 tax year and it made several changes to self-employed tax deductions. Some of them are temporary and set to expire in 2025.

The law has affected small businesses in many ways, mainly via a qualified business income (QBI) deduction for pass-through businesses, those that pay taxes as individual taxpayer(s) rather than through a corporation. The deduction provides a great benefit for owners of sole proprietorships , partnerships, S corporations, and certain limited liability companies (LLCs) . Eligible taxpayers can deduct up to 20% of their QBI.

A pass-through’s QBI is the net amount of qualified items of income, gain, deduction, and loss from a qualified trade or business.

Key Takeaways

The Tax Cuts and Jobs Act included several changes to tax deductions for the self-employed when it went into effect in 2018.
Reviewing what you can deduct each year is important to make your business as profitable as possible if you're self-employed.
You can calculate a deduction for a home office and for a vehicle used for business purposes.
Meals with clients and business travel are deductible, but meals included with entertainment may not be.
Premiums for insurance that you pay for to protect your business and health insurance are legitimate deductions. And don’t forget startup, advertising, and retirement plan costs.

SEP Account

Some deductions have been eliminated or changed post-TCJA:

Entertainment and fringe benefit deduction
Employees’ parking, mass transit, or commuting expenses deduction
Domestic production activities deduction
Local lobbying expenses deduction
The state and local tax (SALT) deduction is limited to $10,000, or $5,000 if you're married and filing separately
The deduction of settlement or legal fees in a sexual harassment case when the settlement is subject to a nondisclosure

Key provisions that are set to expire in 2025 include:

QBI deduction
SALT deduction cap
Standard deduction will return to pre-TCJA levels
Income tax rates will return to pre-TCJA levels

Tax laws are constantly changing and these provisions may be modified or extended at any point before 2025. Reviewing the most common self-employed taxes and deductions is necessary to keep you updated on any changes that are required to your quarterly estimated tax payments.

The self-employment tax refers to the Medicare and Social Security taxes that self-employed people must pay. This includes freelancers , independent contractors , and small business owners. The self-employment tax rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare.

Employers and employees share these taxes. Each pays 7.65%. People who are fully self-employed pay for both parts themselves. An additional 0.9% Medicare tax rate applies if income is above a certain threshold. The income thresholds as of December 2023 are as follows:

Married filing jointly: $250,000
Married filing separately: $125,000
Single: $200,000
Head of household (with qualifying dependent): $200,000
Qualifying widow(er) with dependent child: $200,000

The income thresholds for the additional Medicare tax apply to your combined wages, compensation, and self-employment income. You'd have to pay the additional Medicare tax of 0.9% on the $10,000 by which your joint income exceeds the $250,000 threshold if you have $100,000 in self-employment income and your spouse has $160,000 in employee wages .

The good news is that the self-employment tax will cost you less than you think because you can deduct half of it from your net income when you're calculating your income tax. The Internal Revenue Service (IRS) treats the employer portion of the self-employment tax as a business expense and allows you to deduct it accordingly.

Investopedia's Tax Savings Guide can help you maximize your tax credits, deductions, and savings. Order yours today.

Social Security and Medicare Taxes

The self-employment tax refers to Social Security and Medicare taxes, similar to the Federal Insurance Contributions Act (FICA) tax paid by an employer. It's only a deduction for calculating that taxpayer’s income tax when they deduct one-half of the self-employment tax. It doesn't reduce the net earnings from self-employment or reduce the self-employment tax itself.

You must pay the first 7.65% whether you're self-employed or you work for someone else. You’re indirectly paying the employer portion when you work for someone else because that’s money that your employer can’t afford to add to your salary.

Self-employed individuals determine their net income from self-employment and deductions based on their method of accounting. Most self-employed individuals use the cash method of accounting and will therefore include all income actually or constructively received during the period. They'll claim all deductions paid during the period when determining their net income from self-employment.

The home office deduction is one of the more complex tax breaks. The cost of any workspace that you use regularly and exclusively for your business, whether you rent or own it, can be deducted as a home office expense.

You are basically on the honor system but you should be prepared to defend your deduction in the event of an IRS audit . One way to do this is to prepare a diagram of your workspace with accurate measurements that uses the square footage of your workspace in its calculation. The expenses you can deduct for your home office include the business percentage of rent, deductible mortgage interest, utilities, homeowners insurance, and repairs you pay for during the year.

Fifteen percent of your annual electricity bill becomes tax deductible if your home office occupies 15% of your home.

How To Calculate the Home Office Deduction

You have two choices for calculating your home office deduction: the regular method or the simplified option. You don’t have to use the same method every year.

The regular method requires you to calculate your actual home office expenses and keep detailed records in the event of an audit. The simplified option lets you multiply an IRS-determined rate by your home office square footage. Your home office must not be larger than 300 square feet to use the simplified option, and you cannot deduct depreciation or home-related itemized deductions .

The simplified option is a clear choice if you’re pressed for time or can’t pull together good records of your deductible home office expenses. But it's calculated as $5 per square foot as of tax year 2023, the return you'll file in 2024. So the most you’ll be able to deduct is $1,500 with a maximum of 300 square feet.

Calculate the deduction using both the regular and simplified methods to determine which will give you the greater benefit. Calculate the deduction using IRS Form 8829: Expenses for Business Use of Your Home, if you choose the regular method.

3. Internet and Phone Bills Deduction

You can also deduct the business portion of your phone and Internet expenses. The key is to deduct only the expenses that are directly related to your business. For example, you could deduct the Internet-related costs of running a website for your business.

You shouldn’t deduct your entire monthly bill, including both personal and business use, if you have just one phone line. According to the IRS, “You can’t deduct the cost of basic local telephone service (including any taxes) for the first telephone line you have in your home, even if you have an office in your home.” However, you can deduct 100% of the additional cost of long distance business calls or the cost of a second phone line dedicated solely to your business.

4. Health Insurance Premiums Deduction

You can deduct all your health, dental, and qualified long-term care (LTC) insurance premiums if you're self-employed, you pay for your health insurance premiums , and you're not eligible to participate in a plan through your spouse’s employer.

You can also deduct premiums you paid to provide coverage for your spouse, your dependents, and your children younger than age 27 at year’s end, even if they aren’t dependents on your tax return. Calculate the deduction using the Self-Employed Health Insurance Deduction Worksheet in IRS Publication 535 .

A meal is a tax-deductible business expense when you are traveling for business, at a business conference, or entertaining a client, although entertainment expenses per se are generally not tax deductible.

The meal can't be extravagant under the circumstances. When traveling, you can either deduct 50% of the meal’s actual cost if you kept your receipts or 50% of the standard meal allowance if you kept records of the time, place, and business purpose of your travel but not your actual meal receipts. Unfortunately, that desk lunch is not tax deductible.

The standard meal allowance is the federal meals and incidental expenses (M&IE) rate, updated every fiscal year effective Oct. 1. The rate and M&IE breakdown can be found on the U.S. General Services Administration (GSA) website . Meals can't be deducted if they're not separately identified on the receipt.

Business travel must last longer than an ordinary workday, require sleep or rest, and take place away from the general area of your tax home (usually outside the city where your business is located) to qualify as a tax deduction. You should have a specific business purpose planned before you leave home, and you must engage in business activities while you're on the road, such as finding new customers, meeting with clients, or learning new skills directly related to your business.

Keep complete and accurate records and receipts for your business travel expenses and activities because this deduction often draws scrutiny from the IRS. Deductible travel expenses include the cost of transportation to and from your destination (such as plane fare), transportation at your destination (such as car rental, Uber fare, or subway tickets), lodging, and meals.

You can’t deduct lavish expenses, but you don’t have to choose the cheapest options available, either. You'll still be paying the bulk of your business travel costs so keeping them reasonable is in your interest. Your travel expenses for business are 50% deductible in 2023, the year for which you'll file a tax return in 2024.

Handing out business cards during a family vacation does not make your trip tax deductible.

Your expenses are tax deductible when you use your car for business, but make sure to keep detailed records of each trip’s date, mileage, and purpose. Don’t try to claim personal car trips as business car trips.

You can calculate your deduction using either the standard mileage rate determined annually by the IRS or your actual expenses. The standard mileage rate is $0.655 per mile in 2023, the year for which you'll file a tax return in 2024. Using the standard mileage rate is easiest because it requires minimal record-keeping and calculation. Just write down the business miles and the dates when you drive them, then multiply your total annual business miles by the standard mileage rate.

You must calculate the percentage of driving you did for business all year and the total cost of operating your car, including depreciation, gas, oil changes, registration fees, repairs, and car insurance to use the actual expense method. Your deduction would be $300 if you spent $3,000 on car operating expenses and used your car for business purposes 10% of the time.

You must use the standard mileage rate method on a car you own in the first year when the vehicle is available for use in your business. Then you can use either the standard mileage rate or actual expenses in later years.

Interest on a business loan from a bank is a tax-deductible business expense. The business portion of the loan’s interest expense is allocated based on the allocation of the loan’s proceeds if the loan is used for both business and personal purposes.

Track the disbursement of funds for various uses if the entire loan isn't used for business-related activities. Credit card interest isn't deductible when you incur it for personal purchases, but it's deductible when the interest applies to business purchases.

The cost of specialized magazines, journals, and books directly related to your business is tax deductible as supplies and materials, as are dues or fees for certain professional membership organizations.

A daily newspaper wouldn't be specific enough to be considered a business expense for most businesses, but a subscription to Nation’s Restaurant News would be deductible if you're a restaurant owner. Nathan Myhrvold’s several-hundred-dollar Modernist Cuisine boxed set would be a legitimate book purchase for a self-employed, high-end personal chef.

As for membership dues or fees, you can’t deduct them for belonging to clubs “organized for business, pleasure, recreation, or any other social purpose.” Examples include “country clubs, golf and athletic clubs, hotel clubs, sporting clubs, airline clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussions." But the IRS does make exceptions for groups that it considers to not exist for entertainment purposes, such as:

Boards of trade
Business leagues
Chambers of commerce
Civic or public service organizations
Professional organizations such as bar associations and medical associations
Real estate boards
Trade associations

Any education expenses you want to deduct must be related to maintaining or improving your skills for your existing business. The cost of classes to prepare for a new line of work isn’t deductible. Taking a course called “Real Estate Investment Analysis” to brush up on your skills would be tax deductible if you're a real estate consultant, but a class on teaching yoga would not.

You can deduct your premiums for insurance to protect your business , such as fire insurance, credit insurance, car insurance on a business vehicle, or business liability insurance . Some people don’t like paying insurance premiums because they perceive them to be a waste of money if they never have to file a claim. The business insurance tax deduction can help ease that dislike.

You can deduct the amount that you pay for rent if you rent an office space that's not in your own home. You can also deduct amounts paid for any equipment that you rent and the expense of having to pay a fee to cancel a business lease is also deductible.

The IRS usually requires that you deduct major expenses over time rather than all at once. They're treated as capital expenses. However, you can deduct up to $5,000 in business startup costs in the first year of active trade or business.

Tax-deductible startup costs include market research and travel-related expenses for starting your business, scoping out potential business locations, advertising, attorney fees, and accountant fees. The $5,000 deduction is reduced by the amount that your total startup cost exceeds $50,000. You can also deduct up to $5,000 more in organizational costs, such as state filing fees and legal fees if you set up a corporation or LLC for your business.

Professional fees to consultants, attorneys, and accountants are also deductible at any time, even if they aren’t startup costs. Business expenses such as buying equipment or vehicles aren’t considered startup costs, but they can be depreciated or amortized as capital expenditures .

Do you pay for Facebook or Google ads, billboards, TV commercials, or mail fliers? The costs that you incur to advertise your business are tax deductible. You can even deduct the cost of an ad that encourages people to donate to charity while also putting the name of your business before the public in the hope of gaining customers. A sign advertising “Holiday Toy Drive Sponsored by Robert’s Hot Dogs” would be tax deductible.

15. Retirement Plan Contributions Deduction

The deduction for self-employed retirement plan contributions is incredibly worthwhile. Contributions to simplified employee pension individual retirement accounts (SEP-IRAs), savings incentive match plans for employees (SIMPLE) IRAs, and solo 401(k)s reduce your tax bill now and help you rack up tax-deferred investment gains for later.

You could feasibly contribute as much as $22,500 in deferred salary for the 2023 tax year and $23,000 in 2024. You can make catch-up contributions of $7,500 for a total of $30,000 in 2023 ($30,500 in 2024) if you're age 50 or older.

Your total maximum contributions to a self-employed 401(k) can't exceed $66,000 for 2023 and $69,000 for 2024, not counting catch-up contributions of $7,500 for both employee and employer contribution categories.

Contribution limits vary by plan type and the IRS adjusts the maximums annually. Of course, you can’t contribute more than you earn, and this benefit will only help you if your business leaves you enough profits to take advantage of it.

You can deduct the cost of business supplies and materials that have been “consumed and used during the tax year.” This includes such mundane concerns as copy paper, postage, paper clips, and pens. The IRS also allows deductions for books, professional instruments, and equipment, as long as they're used within the year. You must generally recover its cost through depreciation , however, if an item's use extends beyond one year.

You may still deduct the cost of certain supplies that you keep on hand on a regular basis from year to year if:

You don’t keep a record of when they are used.
You don’t take an inventory of the amount on hand at the beginning and end of the tax year.
This method doesn’t distort your income.

I Rent My Home. Do I Qualify for the Home Office Deduction?

Yes, you can qualify for the home office expense deduction if you meet all business use requirements. A renter can use the simplified or actual expense method based on the percentage of the home that's dedicated to business use.

Is a C Corporation Eligible for the Qualified Business Income'---/p///' Deduction?

No. According to the IRS, “Income earned through a C corporation or by providing services as an employee is not eligible for the deduction.” A C corporation files a Form 1120: U.S. Corporation Income Tax Return and is not eligible for the deduction.

You also can't deduct any portion of wages paid to you by an employer that is reported on a Form W-2 : Wage and Tax Statement. Independent contractors and pass-through businesses are eligible for the deduction. They report their percentage of business income on a Schedule C : Profit or Loss From Business that accompanies Form 1040: U.S. Individual Tax Return.

Which Method Is Better for My Business Vehicle: Standard Mileage or Actual Expense?

It depends on the vehicle-related expenses that you've incurred during the year. It may be more beneficial to use the actual expense method if you’ve spent significant money on maintenance (oil changes, brake pad replacements, new tires), car inspections, and registration.

There are more deductions available than those that are listed here, but these are some of the biggest ones. Credit card processing fees, tax preparation fees, and repairs and maintenance for business property and equipment are also deductible. Other business expenses can be depreciated or amortized . You can deduct a small amount of the cost each year over several years.

Ask yourself, “Is this an ordinary and necessary expense in my line of work?” if you're ever unsure whether a cost is a legitimate business expense. This is the same question the IRS will ask when examining your deductions if you're audited. Don't take the deduction if the answer is no. Seek professional help with your business tax return from a certified public accountant (CPA) or other credentialed tax preparer if you're unsure.

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Internal Revenue Service. " Publication 463, Travel, Gift, and Car Expenses ," Pages 5-6.

U.S. General Services Administration. " Frequently Asked Questions, Per Diem ," Select "Do I Need to Provide Receipts?"

Internal Revenue Service. " Publication 463, Travel, Gift, and Car Expenses ." Pages 3, 5.

Internal Revenue Service. " Topic No. 511, Business Travel Expenses ."

Internal Revenue Service. " Publication 463, Travel, Gift, and Car Expenses ," Page 7.

Internal Revenue Service. " IRS Issues Standard Mileage Rates for 2023; Business Use Increases 3 Cents Per Mile ."

Internal Revenue Service. " Topic No. 510, Business Use of Car ."

Internal Revenue Service. " Publication 535, Business Expenses ," Pages 13-15.

Internal Revenue Service. " Publication 535, Business Expenses ," Pages 32, 47, 49-50.

Internal Revenue Service. " Publication 535, Business Expenses ," Page 47.

Internal Revenue Service. “ Topic No. 513, Work-Related Education Expenses .”

Internal Revenue Service. " Publication 535, Business Expenses ," Page 21.

Internal Revenue Service. " Publication 535, Business Expenses ," Pages 11-13.

Internal Revenue Service. " Publication 535, Business Expenses ," Page 27.

Internal Revenue Service. " Publication 535, Business Expenses ," Pages 27, 30.

Internal Revenue Service. " Publication 535, Business Expenses ." Pages 3, 5, 48.

Internal Revenue Service. " Publication 535, Business Expenses ," Page 46.

Internal Revenue Service. " Retirement Plans for Self-Employed People ."

Internal Revenue Service. " 401(k) Limit Increases to $23,000 for 2024, IRA Limit Rises to $7,000 ."

Internal Revenue Service. " 2024 Limitations Adjusted as Provided in Section 415(d), etc. ," Page 1.

Internal Revenue Service. " Publication 535, Business Expenses ," Pages 49-50.

Internal Revenue Service. " Publication 535, Business Expenses ," Page 11.

Internal Revenue Service. " Forming a Corporation ."

Internal Revenue Service. " Publication 535, Business Expenses ," Pages 5, 29, 47-48.

Understanding Small Business Taxes: A Comprehensive Guide 1 of 21
Tax Implications of Different Business Structures 2 of 21
Accounting for Small Businesses: A Comprehensive Guide to Financial Management 3 of 21
How Becoming an LLC Could Save Taxes Under the Tax Cuts and Jobs Act of 2017 4 of 21
Self-Employment Tax: Definition, How It Works, and How to File 5 of 21
Self-Employed Contributions Act (SECA) Tax: Overview and FAQs 6 of 21
Is Now the Time to Restructure Your Business? 7 of 21
Writing off the Expenses of Starting Your Own Business 8 of 21
5 Tax Breaks Overlooked by Small Business Owners 9 of 21
5 Ways Small Business Owners Can Reduce Their Taxable Income 10 of 21
Top 10 Home Business Tax Tips 11 of 21
Write-Off vs. Write-Down: What's the Difference in Accounting? 12 of 21
How to Make Estimated Tax Payments 13 of 21
Small Business Tax Obligations: Payroll Taxes 14 of 21
7 Ways to Avoid Self-Employed Tax Penalties 15 of 21
Best Tax Software Programs for Small Business 16 of 21
16 Tax Deductions and Benefits for the Self-Employed 17 of 21
The Small Business Health Care Tax Credit 18 of 21
Business Tax Credits: Meaning, How They Work, Example 19 of 21
7 Insurance-Based Tax Deductions You May Be Missing 20 of 21
Indian Employment Credit (IEC): What It is, How It Works 21 of 21

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Freelancers: What Travel Expenses Are Tax Deductible? FlyFin

As an entrepreneur, freelancer, independent contractor you can claim tax deductions for your business travels. According to the IRS, if you wish to claim a travel expense deduction , your trip has to be:

Mostly business-related
An “ordinary and necessary” expense
Someplace far away from your “tax home”

To understand business travel expenses, it is important to differentiate between ordinary and necessary expenses-

An expense is ordinary if it is common and accepted in your industry
An expense is necessary if it is helpful and appropriate for your business

To sum it up, business travel expenses are travel costs associated with running a business, or costs incurred when you are away from your tax home. You can claim business travel expenses when you're away from home but here, "home" doesn't refer to where your family lives. The “tax home” refers to the city where your main place of business is located- which may not be the same as the location of your family/residential home.

Your home office, downtown workspace, or where you live if you have multiple stores can be considered a tax home. However, there are special provisions for having more than one place of business. To qualify for a business travel tax deduction, you need not fly first class or stay at a fancy hotel to claim travel expense tax deductions. Conferences, off-site business meetings, and worksite visits qualify as business travel and qualify for the business travel tax deduction.

Travel tax deductions for freelancers

When you’re self-employed, you’re bound to be on the lookout for ways to reduce your taxes. The good news is that you can deduct quite a few expenses while traveling, such as transportation, meals, lodging from your taxes.

List of business travel expenses

Air travel and pre-check.

Catching a flight to attend a conference or a business meeting is considered a business expense. Your airfare and precheck charges are all tax-deductible.

Transportation

Any sort of transportation cost is a travel expense deduction, this includes flight, train, bus, or car. Moreover, the baggage fees are deductible, and so are Uber rides to and from the airport.

Local transportation costs for taxi fares or other transportation between the airport or station and a hotel, from one customer to another, or from one place of business to another is also considered as a deductible.

Renting a car to attend a business trip counts as a travel expense deduction. The expenses of operating and maintaining a house trailer are also considered as a deductible, provided that using one is "ordinary" and "necessary" for your business

Hotels, Airbnb stays, or any other accommodation charges are tax-deductible lodging expenses.

Tips paid during your business excursion

You can deduct the amount of $5 per day for tips paid during your business excursion, these include:

Tips offered to hotel staff
Tip offered to porters and baggage carriers

When you’re traveling for work, you can write off 50% of all food expenses, this also includes groceries and takeouts.

Moreover, for the years 2021 and 2022, every meal you have at a restaurant is 100% tax-deductible.

Internet and telephone expense

WiFi or any other internet expenses, whether on a plane or at a hotel is completely deductible when you’re traveling for work. This also includes hotspots and international calls.

Shipping of baggage or trade show material

Any shipping charges are also tax-deductible.

Dry cleaning and laundry while on a business trip

You can avail of laundry and dry-cleaning services and get them deducted from your taxes.

Aside from these common expenses, there are a couple of expenses that you cannot deduct from your taxes. These include

The cost of bringing your child or spouse: If you bring your child or spouse on a business trip, it is generally considered a personal expense, which means that it is not a deductible. However, under some circumstances, you may deduct travel expenses if your child or spouse is an employee, has a bona fide business purpose for traveling with you, or is capable of deducting the travel expense on their own.
Gym or fitness center fees
Spa or sauna fees
Shopping charges
Movie rental fees
Game rental fees

Many small business travel expenses are tax-deductible. They don’t include personal expenses or ones used to determine your business’ cost of goods sold. Trips for pleasure can never be deducted.

Travel expenses if you use your vehicle for business

If you drive your vehicle while heading out for a business trip, you can claim a deduction for your mileage and car expenses . Generally, there are two methods to claim the mileage tax deduction:

Standard Mileage Method- You can multiply your business miles driven by the standard rate (58.5 cents in 2022). This amount includes driving costs, gas, repairs/maintenance, and depreciation.
Actual Expenses Method- You can track the actual costs of operating your car. Qualified expenses for this purpose include gasoline, oil, tires, repairs, insurance, tolls, parking, garage fees, registration fees, lease payments, and depreciation licenses.

Business travel and transportation expenses

As mentioned above, any sort of transportation cost is deductible. This involves any business travel by airplane, train, bus, or car between your home and your business destination.

Similarly, fares for taxis or other types of ordinary and necessary expenses related to your business are eligible for travel expense deduction.

This can include transportation to and from a business meal, accountant or lawyer’s office, and operating and maintaining a house trailer.

How to claim your freelancer travel tax deductions?

As per the IRS, you can deduct travel expenses paid or incurred in connection with a temporary work assignment away from home. The following represent the rules set by the IRS:

You must travel away from your main place of business (tax home) for a trip to be considered a business trip. Generally, your tax home is your regular place of business, regardless of where you maintain your family home, and includes the entire city or general area where your business or work is located.
The travel period must be substantially longer than an ordinary day's work and require sleep or rest to meet the demands of the work done while you're away.
You must work during regular working hours. It’s acceptable to take personal time in the evenings. But you can’t take an hour-long call from vacation and call it a business trip. However, there are certain circumstances where you can claim vacation as a legitimate business expense .
The trip must last less than a year. If you happen to stay somewhere for over a year, you’re essentially living there. However, traveling for a short period is fine!

If you fulfill the above criteria, then you can claim the travel expense tax deduction simply by opting for any of the following methods:

You can track each expenditure, keeping in mind that lodging and round-trip travel is 100% deductible and that restaurant meals are 100% deductible.
You can skip the manual tracking of each expense and use a per-day rate for lodging, meals, and incidental expenses. The manual tracking method is said to be more streamlined and can help you budget more easily.

If you are paying for the travel expenses of subcontractors, it also helps you set up a limit to your potential expenses because they will have to pay the difference if they exceed your established daily allowance. On the flip side, if they spend less than your daily allowance, they will keep the difference.

The first method is a traditional itemized deduction approach- which requires receipts and bills for every expense and record-keeping of each category of your travel expenses. However, this can become tedious due to the significant amount of time and commitment needed to collect receipts and track expenses using software or a tax professional.

If you go for the second option- the daily allowance method, theoretically, you will spend less time record-keeping as long as your per day rate does not exceed the daily rate established by the federal government for its employees traveling to the same destination.

To keep your per-day payments free of tax obligations, each expense must have a detailed record of its date, place, and purpose. With this proof, you can deduct 100% of lodging and restaurant meals per day.

Regardless of which method you choose, every expense must serve a legitimate business purpose.

Where to claim travel expenses if you are self-employed?

If you are self-employed, you can claim all your income tax deductions on Schedule C of Form 1040. Freelancers can often benefit by claiming travel expense deductions .

Tracking your travel expenses can be troublesome, but with FlyFin, you can reduce your tax burden. With the FlyFin app, you’ll get a detailed summary of all your travel-related expenses.

The A.I. can help you scan your transactions for business travel. It is the ideal app to help your figure out your freelance tax deductions.

The app will help you perform the calculations and provide you with an accurate tax amount since it is powered by AI and backed by CPAs whom you can consult to determine the right set of deductions. Plus, you can use FlyFin’s self-employed quarterly tax calculator to manage your quarterly taxes.

FlyFin CPA Team

With a combined 150 years of experience, FlyFin's CPA tax team includes tax CPAs, IRS Enrolled Agents and other tax professionals, offering users the most comprehensive tax advice and preparation.

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How to Claim Business Travel When You’re Self-Employed

Posted on Published: 17th October 2018 - Last updated: 24th January 2024

Categories Self Employment Tax

Claiming for business travel as an expense on your tax return is a handy way to reduce your tax bill. However, the HMRC rules surrounding what you can and can’t claim are very strict. That’s because they want to keep things fair across everyone in the self-employed community.

In this guide, you’ll find out what travel expenses you can claim on your tax return along with examples to help you understand how the rules work.

1.1 what is a normal business commute, 2.1 what is an irregular journey, 2.2 dual purpose trips, 2.3 travel to a permanent place of work, 3. claiming for overseas business travel, 4. claiming for overnight stays, 5. how to claim for business travel in your own vehicle, 6. keeping a record of your self-employed travel expenses, 7. how to claim travel expenses on your tax return, 1. what counts as business travel when you’re self-employed.

You can claim for business travel outside of your normal business commute against your taxes, also known as irregular travel. That includes times like when you see a client, supplier & other one-off trips.

A normal business commute means your usual travel between your home and your base of work. If you’re mainly based at home, then your home office will be your base of work so you’ll have no business commute. However, if you rent an office then that location will become your base of work. This means you cannot claim business travel between your home and work on your tax return .

For those that store tools or equipment at a location away from their home and travel to collect equipment on the way to work, then any travel between home and collecting tools is not a tax deductible expense.

2. How to Claim Business Travel When You’re Self-Employed

You can claim for business travel outside of your normal commute if you are self-employed. However, it’s only on the premise that it meets with HMRC guidelines.

For your business travel to be an allowable expense , each journey you undertake must be:

An irregular journey, outside of your normal commute;
Fully business related and not contain any element of personal travel (also known as a dual purpose trip );
Not related to a regular contract/arrangement with a client.

In general, irregular business travel for the self-employed, means travel outside of your normal commute and is tax allowable. That’s times like when you travel to a one-off client meeting, sales meeting or to meet a supplier.

A self-employed bookkeeper travels from their office to meet with a potential new client at their premises. The cost of doing so would be tax deductible.

A dual-purpose trip is one that has a personal element to it. For example, where you sight-see as part of your work trip, take your family along or even just stop to buy a pint of milk on the way home! Consequently, your entire trip could be rendered a disallowable expense .

Travel to a permanent place of work is not a tax allowable expense and this could include travel to work at a clients workplace on an ongoing basis. Travel to a temporary workplace would be tax allowable.

You could keep entirely separate receipts and expenses for the business side of your trip and book your family’s ticket separate from your own. That way if the HMRC does investigate your expense claim they wouldn’t be able to see that you took your family with you.

If your business travel includes an overnight stay, then you can claim the cost of this as part of your travel. You can do this along with food and drink you have had to pay for as part of your irregular journey. You can claim for the following:

The cost of your travel to the location;
Accommodation for your overnight stay;
A reasonable amount for an evening meal and breakfast;

Just like with business travel, the rules for what you can and can’t claim on your tax return when it comes to food are quite strict. Read this guide to claiming for food when you’re self-employed to help you decide what is an allowable business expense.

Whilst the amounts you spend on taxis, train fares and flights are easy to identify, if you use your own car for business purposes you’ll need to decide which is the most tax efficient way to claim for using your car for work reasons. This will most likely depend on how much business travel you do.

The main ways you can claim for using your car for reasons is to:

Claim for business mileage at the set rate by HMRC;
Buy a car through your business as a sole trader , with for cash or a lease;

Just like any other business expenses, you need to keep receipts and invoices to support any business travel you are claiming on your tax return. For things like hotels, Uber and flights this is straight-forward because you’ll probably be emailed any receipts for the things you buy.

If you are claiming for business mileage, then you’ll need to keep a record of the miles you have travelled, you also need the date and reason. You can find out how to download a business mileage expense claim form here.

You need to claim the cost of tax-deductible business travel in the self-employment section of your tax return. If your business turnover is less than £85,000 for 2021/2022, you’ll have the option to fill in the simplified version of this part of the tax return. Therefore, you only need to enter your total expenses. You need to include your business travel claim in the figure you enter alongside your other allowable business expenses.

If your business turnover is more than £85,000, you need to enter a breakdown of your expenses in the boxes set out by HMRC . Here, you should include your business travel in car, van and travel expenses.

Whatever your business turnover , you should keep a note of what you are claiming for and how you worked it out as part of your business records . This is in case of an HMRC investigation and they ask for evidence of what you are claiming for to check you’ve paid the right amount of self-employed tax .

When it comes to claiming expenses, always use your judgement when it comes to deciding what you deduct against your taxes. Incorrect claims can result in penalties . And, as always, if you aren’t sure, seeks the advice of a professional.

Can I Buy a Car Through my Business as a Sole Trader?
Are Training Costs Tax Deductible?

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Business and self-employed
Business tax

Expenses if you're self-employed

Car, van and travel expenses.

You can claim allowable business expenses for:

vehicle insurance
repairs and servicing
hire charges
vehicle licence fees
breakdown cover
train, bus, air and taxi fares
hotel rooms
meals on overnight business trips

You cannot claim for:

non-business driving or travel costs
travel between home and work

You may be able to calculate your car, van or motorcycle expenses using a flat rate (known as simplified expenses) for mileage instead of the actual costs of buying and running your vehicle.

Buying vehicles

If you use traditional accounting and buy a vehicle for your business, you can claim this as a capital allowance .

If you use cash basis accounting and buy a car for your business, claim this as a capital allowance as long as you’re not using simplified expenses .

For all other types of vehicle, claim them as allowable expenses.

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IRS updates per diem guidance for business travelers and their employers

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IR-2019-190, November 26, 2019

WASHINGTON — The Internal Revenue Service today issued guidance for business travelers, updated to include changes resulting from the Tax Cuts and Jobs Act (TCJA).

Revenue Procedure 2019-48 PDF , posted today on IRS.gov, updates the rules for using per diem rates to substantiate the amount of ordinary and necessary business expenses paid or incurred while traveling away from home. Taxpayers are not required to use a method described in this revenue procedure and may instead substantiate actual allowable expenses provided they maintain adequate records.

Although TCJA suspended the miscellaneous itemized deduction that employees could take for non-reimbursed business expenses, self-employed individuals and certain employees, such as Armed Forces reservists, fee-basis state or local government officials, eligible educators, and qualified performing artists, that deduct unreimbursed expenses for travel away from home may still use per diem rates for meals and incidental expenses, or incidental expenses only.

The revenue procedure makes clear that TCJA amended prior rules to disallow a deduction for expenses for entertainment, amusement, or recreation paid or incurred after December 31, 2017. Otherwise allowable meal expenses remain deductible if the food and beverages are purchased separately from the entertainment, or if the cost of the food and beverages is stated separately from the cost of the entertainment.

The IRS annually issues guidance providing updated per diem rates; Notice 2019-55 PDF provides the rates that have been in effect since October 1, 2019.

Self-employed? Here are five (perfectly legal) ways to beat the taxman

Becoming your own boss opens up a world of possibilities – but perhaps the greatest downside to self-employment is the burden of having to calculate and pay your own tax bill.

Whereas HM Revenue and Customs collects income tax from employees directly through the PAYE system, the self-employed must work out what they owe and report this via self-assessment every year.

If you operate as a sole trader, then you will pay income tax on your business profits, minus expenses. You will also need to pay class 2 and class 4 National Insurance contributions (NICs) if your profits are above £12,570.

If you work through a limited company, then as a director you will pay income tax and NICs on the income you take. However, you can choose to take some of your income as dividends, which are not subject to NICs.

Every penny counts when you run your own business, so it is important to cut tax where you can. This is especially important given the UK’s tax burden is on track to reach its highest level since the Second World War , according to the Office for Budget Responsibility, because of the Government’s freeze on tax thresholds.

Under Chancellor Jeremy Hunt, the self-employed also face a number of tax rises.

For example, working through a limited company means you may have to pay corporation tax. The Government increased the rate of corporation tax this year so owners of limited companies with profits of over £250,000 now pay tax at 25pc, up from 19pc.

Meanwhile, the dividend tax allowance has dropped from £2,000 to £1,000 and will fall again to £500 next year, meaning company directors who pay themselves in dividends face higher tax bills.

If you are one of the 4.4 million self-employed people in the UK, then Telegraph Money has five tips to help you avoid the Chancellor’s tax raid and keep more of what you earn.

Maximise all your expenses

The more business expenses you can claim, the less tax you will pay. This is because you can deduct these expenses from your profits; and as you get taxed on your profits, your tax bill will therefore be reduced.

Seb Maley, of Qdos, a tax insurance provider for the self-employed, said: “This is one of the smartest ways to reduce your tax bill, with the self-employed able to claim a range of business-related expenses – from travel costs to internet and phone bills, to marketing spend and mileage.”

Generally, expenses must be incurred “wholly and exclusively for business purposes”, to be deductible from taxable profits.

Examples of business expenses:

Travel costs
Training courses
Office supplies
Legal costs
Business premises
Advertising and marketing
Business insurance.

Matthew Todd, of tax firm RSM, said: “Timing of expenses can be key. If a taxpayer is having a bumper year, they may wish to advance anticipated expenses into that tax year in order to obtain tax relief.”

Some of the simplest expenses you can claim are those for working from home. If you work from home for more than 25 hours a month, then you claim via the flat-rate method, based on hours worked from home, which saves you having to work out what proportion of your heating and electricity is spent on business use.

“Self-employed workers can shave over £300 a year from their tax bill this way,” Mr Maley said.

If your business has a small income, or if you run a “side hustle”, then instead of claiming all your expenses, it might make more sense to claim the £1,000 trading allowance.

Now read: How the Government waged war on the self-employed

Pay into your pension

One of the biggest advantages of paying into your pension is the tax relief you receive on your contributions.

For every £100 you put in, the Government will automatically add £25. For higher-rate and additional-rate taxpayers, the bonus is even higher. They can claim an additional 20pc or 25pc in tax relief through their tax return – just make sure to include the gross value of your pension contributions, that is, the total amount paid in by you plus the 20pc tax relief.

The extra tax relief will either be paid to you directly, or used to reduce your tax bill.

So this is well worth considering if you have spare cash. The annual allowance for tax relief on pension contributions has been increased this year, so the maximum you can add in one year is £60,000. With carry forward, you can also use any unused annual allowance from the three previous tax years.

Now read: How to double your pension at the press of a button

Claim loss relief

Turning a profit when you work for yourself isn’t a given, but the good news is that you can use any losses you make to reduce your tax bill wherever you have made a profit. This is also known as “sideways loss relief”.

“If a sole trader makes a loss, they may be able to offset that loss against other taxable income in the same or previous tax year, or against capital gains in the same or previous tax year,” said Mr Todd. You usually make a claim for loss relief on your self-assessment tax return.

Consider incorporating your business

Incorporating your business means setting up as a limited company, with yourself as director. This allows you to pay yourself in a combination of salary and dividends.

Dividend income earned above the annual tax-free allowance of £1,000 is taxed at 8.75pc for basic rate taxpayers, 33.75pc at the higher rate and 39.35pc at the additional rate.

However, because of the rise in corporation tax and the cut to the dividend allowance, incorporating is not as tax-efficient as it once was.

“People working through their own limited company have had a hard time of it in recent years, with the government increasing the tax burden on these workers significantly,” Mr Maley said. “However, the tax planning opportunities – and the ability to withdraw money from your business in a tax-efficient manner – mean incorporating your business remains a more tax-efficient way to operate.”

However, it may not be such a good idea if you need the net income generated by the business, Mr Todd said.

“Generally, if an individual spends their profits personally as they arise, it may not make sense to incorporate as two layers of tax will be incurred to spend the profits – firstly corporation tax in the company, then income tax in extracting the profits from the company. This can make incorporation a more expensive alternative.”

Ultimately, the commercial considerations will probably be more important than the tax savings when it comes to deciding whether or not to incorporate.

Get rewarded for charitable donations

Ticking the “gift aid” box when you make a charitable donation means charities can claim back 25pc from the tax man for every £1 you donate.

But if you’re a higher or additional-rate taxpayer, you can claim the difference between the rate of tax you pay, and the basic-rate of tax relief paid on your donation.

For example, if you made a £1,000 donation to a charity, they would claim £250 in tax relief, bumping up your donation to £1,250. However, if you pay higher-rate tax, you’d have paid 40pc on this money, meaning you can claim a further £250 (20pc of £1,250).

You can detail your donations in your self-assessment tax return. Note that you will not qualify for Gift Aid if donations exceed four times your tax bill.

Now read: Six easy (and completely legal) ways to avoid inheritance tax

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IMAGES

Guide to travel related work expenses
The 3 Most Common Business Travel Expenses Every Employee Should Be
Self-Employed Allowable Expenses
Claiming Work Travel Expenses
A Short Self-Employed Guide to Deducting Travel Expenses
Guide to Business Travel Tax Deductions for the Self-Employed

VIDEO

Why You Should Become Your Own Travel Agent
Self-Employed Mileage Tracking and Expenses Explainer

COMMENTS

Topic no. 511, Business travel expenses
Travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. You can't deduct expenses that are lavish or extravagant, or that are for personal purposes. ... If you're self-employed, you can deduct travel expenses on Schedule C (Form 1040), Profit or Loss From Business (Sole ...
Guide to Business Travel Tax Deductions for the Self-Employed
When it comes to deducting mileage, there are two options. The first is to apply the standard mileage rate of 65.5 cents per mile for 2023 to all mileage accrued. The second is to list actual costs of gas, oil, insurance, maintenance of your vehicle, etc. It's important to be aware that only mileage accumulated specifically for work-related ...
How to Deduct Business Travel Expenses: Do's, Don'ts, Examples
A taxpayer can deduct travel expenses anytime you are traveling away from home but depending on where you work the IRS definition of "home" can get complicated. ... If you are self-employed, you will claim all your income tax deduction on the Schedule C. This is part of the Form 1040 that self-employed people complete ever year.
Guide to Deducting Business Travel Expenses
Here's a list of common self-employed business travel expenses you can deduct as a taxpayer: Meal expenses (50% deductible) Lodging. Transportation costs (can include gas, airfare, car rental fees, taxis, baggage fees and other travel-related expenses) The cost of transporting supplies, such as display materials.
Tax Deductions for Business Travelers
When you are self-employed, you generally can deduct the ordinary and necessary expenses of traveling away from home for business from your income. But before you start listing travel deductions, make sure you understand what the Internal Revenue Service (IRS) means by "home," "business," and "ordinary and necessary expenses."
Can I deduct travel expenses?
SOLVED • by TurboTax • 5275 • Updated November 30, 2023. If you're self-employed or own a business, you can deduct work-related travel expenses, including vehicles, airfare, lodging, and meals. The expenses must be ordinary and necessary. For vehicle expenses, you can choose between the standard mileage rate or the actual cost method ...
Determining Tax Deductions for Travel Expenses + List of Deductions
Self-employed business owners will deduct their travel expenses on Schedule C, while farmers will use Schedule F. Purely personal expenses on business trips, such as sightseeing, are nondeductible. Step 1: Determine Your Trip Meets the Requirements of a Business Trip
7 Rules You Should Know About Deducting Business Travel Expenses
Business travel expenses are entered on Schedule C if you're self-employed. The schedule is filed along with your Form 1040 tax return. The schedule is filed along with your Form 1040 tax return. It lists all your business income, then you can subtract the cost of your business travel and other business deductions you qualify for to arrive at ...
How to Deduct Travel Expenses (with Examples)
If you're self-employed, you'll claim travel expenses on Schedule C, which is part of Form 1040. How Bench can help. When it comes to taking advantage of the tax write-offs we've discussed in this article—or any tax write-offs, for that matter—the support of a professional bookkeeping team and a trusted CPA is essential.
Deductible Business Travel Expenses for Solo Business Owners
When travel is entirely for business, and you don't add personal excursions, you can generally deduct all related travel expenses. If you travel outside the United States for more than a week and up to 25% of your time is spent on personal purposes, you can deduct your travel to and from the destination and business-related expenses while away.
The Ultimate List of 34 Tax Deductions for Self-Employed Business
The deduction is based on how much you use your phone or internet for business use versus personal use. For example, if you use your cellphone 50% of the time for business, then you'll deduct 50% of your phone bill. If your monthly phone bill is $100, then the deductible portion is $50.
What Travel Expenses Are Deductible for the Self-Employed?
If you travel outside the United States for no more than seven consecutive days, you can deduct 100 percent of your transportation expenses if you spend part of the time on business. It doesn't have to be a majority of the time, just some of your time. You can also deduct the business expenses on those days you do work.
17 common self-employed tax deductions
So, if you make $10,000, you'll need to pay $1,530 in self-employment taxes. However, 50% of what you pay in self-employment taxes is deductible. For example, if you pay $1,530 in self-employment taxes, you will be able to reduce your taxable income by $765. You can deduct 50% of your self-employment taxes. 3.
16 Tax Deductions and Benefits for the Self-Employed
IRS Publication 587: Business Use of Your Home (Including Use by Day-Care Providers): A document published by the Internal Revenue Service (IRS) that provides information on how taxpayers who use ...
What self-employed expenses can I deduct?
Work-related expenses reduce your taxes by lowering the amount of self-employment income you get taxed on. For example, if you made $50,000 in self-employment income and had $5,000 out-of-pocket expenses, you'd only get taxed on $45,000. For state-specific questions regarding your work, contact your state's Department of Revenue.
Freelancers: What Travel Expenses Are Tax Deductible? FlyFin
If you are self-employed, you can claim all your income tax deductions on Schedule C of Form 1040. Freelancers can often benefit by claiming travel expense deductions. Conclusion. Tracking your travel expenses can be troublesome, but with FlyFin, you can reduce your tax burden. With the FlyFin app, you'll get a detailed summary of all your ...
Here's what taxpayers need to know about business related travel
Self-employed or farmers with travel deductions. Those who are self-employed can deduct travel expenses on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship). Farmers can use Schedule F (Form 1040), Profit or Loss From Farming. Travel deductions for the National Guard or military reserves
How to Claim Business Travel When You're Self-Employed
This will most likely depend on how much business travel you do. The main ways you can claim for using your car for reasons is to: Claim for business mileage at the set rate by HMRC; Buy a car through your business as a sole trader, with for cash or a lease; 6. Keeping a Record of Your Self-Employed Travel Expenses.
Expenses if you're self-employed: Car, van and travel expenses
train, bus, air and taxi fares. hotel rooms. meals on overnight business trips. You cannot claim for: non-business driving or travel costs. fines. travel between home and work. You may be able to ...
Solved: I'm self-employed. I paid for hotel but was reimbursed ...
Included in my invoice is travel time and hotel but as a separate line item. My 1099 is a lump sum of what they paid me. Do I claim my hotel stays as an expense? ... Tax refund calculator Tax bracket calculator W-4 withholding calculator Self-employed expense estimator More calculators Latest tax law changes Active duty/reserve military Product ...
IRS updates per diem guidance for business travelers and their
IR-2019-190, November 26, 2019. WASHINGTON — The Internal Revenue Service today issued guidance for business travelers, updated to include changes resulting from the Tax Cuts and Jobs Act (TCJA). Revenue Procedure 2019-48 PDF, posted today on IRS.gov, updates the rules for using per diem rates to substantiate the amount of ordinary and ...
Self-employed? Here are five (perfectly legal) ways to beat the ...
If you work from home for more than 25 hours a month, then you claim via the flat-rate method, based on hours worked from home, which saves you having to work out what proportion of your heating ...